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Ladies and gentlemen, good day, and welcome to the Kaya Limited Q4 FY '22 Results Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sachin Bobade from Dolat Capital. Thank you, and over to you, sir.
Thank you, Faizan. On behalf of Dolat Capital, I welcome you all to the Q4 FY '22 Earnings Conference Call of Kaya Limited. Hope you all and your family are staying safe and healthy. From the management side, we have with us Mr. Rajiv Suri, Global Chief Executive Officer; Mr. Rajiv Nair, Chief Executive Officer, Kaya Group; and Mr. Saurabh Shah, Chief Financial Officer. Now I hand the floor to the management for their opening remarks, and then we would have question-and-answer session. Over to you, sir.
Thank you. Good afternoon, everyone. I welcome you all to the conference call on company's behalf. Let me begin the conference call with a very short update on fourth quarter performance of Kaya Limited, which is already in public domain and uploaded on our website, www.kaya.in.
Kaya Limited posted consolidated revenue from operations of INR 83.5 crore for the quarter ended 31st March 2022, a decline of 6% over corresponding quarter ended 31st March 2021. Consolidated EBITDA is INR 3.8 crore in Q4 financial '22 as compared to INR 19.1 crore in Q4 financial '21. Consolidated losses after tax and before exceptional item for Q4 '22 is INR 41.3 crore as compared to loss of INR 2.1 crore in Q4 financial '21. There has been a onetime impact taken for INR 29.9 crores, mainly on account of clinic impairment into clinic in India and Middle East, which is around INR 15.4 crore and goodwill impairment in Middle East, which is INR 8.1 crore. Kaya India loss after tax and before exceptional item for the Q4 financial '22 is INR 8.5 crore as compared to profit of INR 1 crore in Q4 financial '21. Kaya Middle East loss after tax and before exceptional items for the Q4 '22 is in INR 32.8 crore as compared to loss of INR 3.1 crore in Q4 '21. Collection in India in clinics declined by 2% in Q4 financial '22 as compared to Q4 '21 on SSG basis due to COVID scenario. Collection in clinics in Middle East region declined by 1% at constant currency in Q4 financial '22 as compared to Q4 '21 due to COVID scenario. The detailed information update is already with you. I now open the session for questions, and my colleagues and I would be glad to answer them.
[Operator Instructions] The first question is from the line of [ Somesh Kumar ], individual investor.
This is [ Somesh Kumar ], and I have 3 very quick questions. One is that any plan to start laser hair removal services at home, 1 question? Second is any new branches planned this year, domestic and international? And third, any new service lines being planned in FY '23?
Okay. This is Rajiv Nair here. So let me just answer your questions, all the 3 questions that you have. One is on the laser hair removal services at home. At this stage, we believe that our singular motto for the business is safety and efficacy on these services. And we don't believe at this moment that we will be able to provide safety and high efficacy using services at home because these are high-quality devices with trained professionals under the guidance of a dermatologist, who is a doctor. At this moment, many companies are doing these services on a remote basis with some consultants online. In our case, there's a physical doctor in supervision. We believe it's a safety hazard at this stage to carry these machines to customers' residences, and that's why we prefer these services to be done in the clinic.
The good news is that post-COVID, we have seen growth in this category quite highly, largely because of the safety aspect. And we believe in the short, medium term, at least these services will be better accepted in clinics, and we'll continue to do it in clinics. The second one you mentioned was on the new expansion or expansion of clinics. Yes, it's been a long time since Kaya has not undertaken expansion. So obviously, that's 1 of the priorities for growth of revenue. And we -- as we speak, we have already identified 1 property in the city of Lucknow, where we are planning to go ahead and make our first new clinic after quite some time. And if opportunistically, we are able to get more properties in this financial year, we'll look for more expansion in this financial year. The third question was about new services. As you may have realized in the last few conference calls, we mentioned about body contouring as a service, which has started in the Middle East about 2, 2.5 years ago. And now it's a very strong vertical with about 10% contribution to the revenues of the business. We plan to actually pilot body contouring for which we've procured 4 machines from a company called Allergan. It's a service known as CoolSculpting. We've set up these machines in Delhi and over the last 3 months, we are piloting the performance of this particular service. If we are successful in it, then we will expand this across the market. So body contouring would be the next big vertical that we would try and focus on. So those are the 3 questions you asked.
[Operator Instructions] The next question is from the line of Sachin Bobade from Dolat Capital.
Sir, just 1 question from my side. Just a broad-based question, and partly extension to what last participant asked. See, last 2 years, we were struggling against because of pandemic. So store closures was a main problem. Malls were not open, clinics were not open. But now 1 more bigger problem we are facing is inflation. So directly, it is not impacting our products. But then a few categories would definitely have impact. So wallet size or share of wallet shift from 1 category to different categories. So in this perspective, how -- whether we are planning to offer few services which are economical in nature or new consumers can add up then? So what is your thought process on this?
Yes. I think inflation is definitely a real challenge in the next 1 or 2 years at least. And we already see that there are certain segments where we have global sourcing, especially around areas like injectables, where the cost of goods have gone up. We don't believe in the other segments that we are largely procuring from India, at this moment, we have seen that kind of an inflationary impact. But we do anticipate that such an impact can happen. So we have to counter this, we are also trying to ease up the issue for customers through simple systems like finance for customers. So as we speak, we are increasing the contribution of direct consumer finance in the business from around 5% mix to our business to about 10% mix to our business. So almost all the new-age customers who're coming into the business and want to partake in our type of service and would like to buy our service and -- which are expensive, they can avail a finance facility. So we are providing 0% finance with companies like Bajaj Finance in the country. At the same time, what we've done is price elastic categories like laser hair removal, like acne, acne scar, like facial, these are price-sensitive categories. We have, at this moment in time, not raised up prices, and we don't deliver a huge increase in cost of goods sold, that's why we've retained the prices so customers can enjoy a good pricing for some more time. And hopefully, that will help us increase volumes in this category.
Just same question for Middle East. Because here, we are facing inflation, but for Middle East, it's an oil economy and can benefit. So there, can we see a positive surprise in terms of significantly higher growth in revenues or some sort of -- our customer count increasing?
Rajiv, would you like to take that?
Yes. So Middle East, for quarter 4, went through the similar situation. In fact, Middle East COVID impact in Dubai started in mid-December, so a little bit earlier than India and continued till February. So quarter 4 was impacted by that. Having said that, our performance in month of March was 99% of pre-COVID level, so we were quite pleased with that performance, and we look forward to continuing to build on that in the coming quarter.
The next question is from the line of [ Avesh Bakshi ], individual investor.
Am I audible?
Yes.
Yes. You are audible, yes.
I just wanted a brief on how is the online e-commerce segment shaping for us?
Yes. So we've seen a good quarter last quarter. We've seen a growth of about 38% in the e-commerce segment in the last quarter. We believe it's a strong growth engine for the product business. And to support that, what we've done is in the month of November, actually launched our first D2C site -- I mean it's a completely revamped D2C site while we had a D2C site. It's built on a new platform, which is Magento. And we -- most of our products are currently available on the website. We also built an AI-based tool on the website for skin analysis and recommendation to customers for products. So we do believe this will be a strong area for us in to drive our e-commerce business alongside partner retailers like Amazon, Nykaa, Myntra, Flipkart, et cetera. So we do believe e-commerce will be a strong area for growth. And last quarter has shown some good results for e-commerce.
And sir, a follow-up on this, what is the contribution coming from these e-commerce sites versus our own site?
So our current website, our website is a very small part of the total contribution. We would not be more than 5% of the total mix of e-commerce business with our own website. But that's also because we have done a revamp of website as late as November-December. And we do believe over the quarters, we are expecting a larger share of the Kaya D2C website. But at this stage, it's early days, and we are still working on the website and trying to improve the traffic into the website. And once that happens, I'm sure the numbers will increase on our own website.
Fine. And my second question was, can you provide any guidance for any new clinic openings we are expecting either in India or Middle East for the next, say, 1 to 2 years?
You're talking new openings?
Yes, sir.
Yes, I did mention in the previous -- to the previous caller that we are opening up our first clinic in India after quite some time after COVID in Lucknow, the city of Lucknow. We are on the lookout for properties in Tier 2 cities of India. As and when there are opportunistic possibilities available, we will open up more clinics in the country. At this moment, I can't give you a number for that. But definitely, we are on the lookout for new properties.
[Operator Instructions] The next question is from the line of Rohit Balakrishnan from iThought PMS.
Am I audible?
Yes.
Yes. So just wanted to understand your -- can you share how much revenue did we do from products? I see you said [ 22% for the ] collections, so that's roughly about INR 78 crores. Can you just share in absolute numbers what was this number last year for FY '21?
Yes, I will just give it to you. So an absolute number for YTD we did in overall group prospect is around INR 49.27 crore; while last year, it was INR 46.6 crore on a net revenue prospective -- on a collection prospective, sorry.
For products you're saying is INR 49.27 crores and [indiscernible]
Yes. INR 46.96 crores.
Actually, I was seeing your presentation, I think -- I don't know if I'm wrong, but it's just 22% of net revenue. So it's not...
So that is the Q4. That is the Q4. I gave you the YTD number.
Okay. So -- I mean sir, just [Technical Difficulty]
Sorry to interrupt you Mr. Balakrishnan...
Your voice is cracking up a bit.
Please use the handset mode.
Okay. Sorry. Is it any better now, sir?
Yes. Better, better.
Yes. Okay. So even like on a base of INR 45 crores, INR 46 crores, you only own about 7%, 8% or maximum 10% to reach about INR 49 crores on the products. I mean is this the growth that is possible in the products that we are doing or like -- I mean -- just wanted to understand what could be the desirable growth in these categories that we are in? I assume that we're in a slightly higher priced segment. So just wanted to understand your -- what do you aspire and what's your outlook on growth for products?
A couple of things. I think last year is not a very good comparison because there have been multiple rounds of COVID which has impacted. But the walk-in into the clinic because clinic still, as mentioned earlier, it is about 70% of the business, 78% of the business coming from the clinic business, the footfall into clinic in at least 2 quarters was completely impacted because of COVID. But we can see a sequential improvement in performance of clinic because of better walk-ins right up from December of last year, going all the way up to Feb and March of this year, while Jan was fairly disruptive. So we do expect a good growth of product this year vis-à-vis last year for 2 reasons, one is, of course, the customer footfall traffic will improve. We have a better focus on product development this year. So we have a strong pipeline of products. So I think we mentioned that in the investor presentation as well that we have some strong launches of products that we did in the clinics over the last 2 quarters. So there are some very strong dermatology-led products that are coming up. E-commerce focus also will help us grow business in the non-Kaya clinic ecosystem. So that's the other area that we are looking at. And of course, as a group, we will be focusing a lot more on the product business in the Middle East as well, and there will be renewed focus on development of product lines which are centered for that consumer.
So I think Middle East business growth on products will also be fairly strong this financial year. So that's the overall plan in terms of growth.
Got it. Okay. And sir, just 1 more question was, I mean, I see that you're doing a rights issue. Can you just spell out what -- I mean, what is the thought process amount? And what would be the usage of the same?
So Rohit, since the whole system isn't processed currently in the pipeline. So currently, for deployment plan, it would be difficult to currently articulate the whole scenarios. So maybe we'll update you soon on the deployment plan and other thing.
Okay. Sure. But how much are we looking to raise?
So we've already intimated that we will not be exceeding INR 200 crore, that's what the intimation to the stock exchange has gone.
Okay. But I mean -- but is that -- I mean, should we tend intend to do INR 200 crores. Is that the right understanding?
So we would not be expecting INR 200 crores, that's what the understanding is.
[Operator Instructions] The next question is from the line of [ Viresh Sangva ], individual investor.
Just wanted to check on the rights issue, like what's the intention? And what's the plan with the money collected from right issue?
So Mr. [ Viresh ], Saurabh here. I briefed in the previous question. So currently, the deployment plan, currently I can't disclose because we have just intimated today. There is a committee which will form and all the deployment plan will be discussed and would be communicated in due course.
Okay. And by what time should it be kind of clear, like in month, 2 months' time?
Maybe in -- so give us time, maybe at 1, 1.5 months, we'll get back to you based on all the process gets completed and stock action gets integrated and that's procedure committee may discuss. And post that, we may communicate to all of us, all of the shareholders, what would be the right issues and all the options. So give us time because it's a due diligence process and all this stuff we have to go to the SEBI and get approval nod and everything. So until the process gets completed, we would not be able to communicate on the deployment plan.
The next question is from the line of Anoop Nambiath from Equity Intelligence.
So my question was primarily related to the impairments that you've made in India clinics and in Middle East clinics. So what is the nature of these impairments that you have made? And do we expect any further impairments that is pending in the future quarters?
Saurabh here. The impairment in clinics are based -- because if you recollect last 2 years, because of the COVID, there is a dilution in performance. And because of accounting standard, the auditor has to evaluate the performance. And on that basis, [indiscernible] the impairment scenarios. And there is a -- because of the performance, the COVID numbers not matching the requirement environment, there is an impairment in Middle East clinics and also in India Clinics.
No. Saurabh, what I'm trying to understand is this, what kind of nature is this impairment? Is it on the equipment that we own or is it something related to the brand? What are we impairing here?
So there are 2 types. There is 1 [ lease-all ] impairments. What we deploy the [ lease-all ] impairments impairment [indiscernible] clinic -- that forms a major part of the clinic impairment cost. And based on the -- another 1 is the impairment of the goodwill. In Middle East, there are 2 clinics, which is in -- 1 is in [indiscernible] and one is in Fujairah, where we have taken a goodwill impairment.
Is there anything pending there now, like should we expect more of impairments in the coming quarters, or this is it, final?
So it will based on the performance. So currently, it would be difficult to communicate or estimate the impairment scenario. As and when the performance improves, there may not be, but it depends upon the performance and how do the auditory evaluates the scenario.
Okay. So second question was to Rajiv Nair. So this we are -- after finally long time, we are opening a new clinic in Lucknow. So just to understand the thought process now, are we ready for a store like clinic expansion now having got the unit economics of each and every clinic right here? Like what is the opportunity that we are seeing here in expansion?
So, Anoop, while we were looking at the kind of matrix of clinics that we have in the business, we realized that a lot of our Tier 2 towns and cities, even at our median turnovers, are generating very good EBITDA as a business. And there is an opportunity for us to kind of expand on this premise and actually expand our footprint in Tier 2 cities in the country because we have a fairly good presence in the top metros of the country. But the Tier 2 cities is where there is a lot more aspiration, awareness and changing new-age consumer. So Lucknow being 1 of the highly profitable cities, we have actually started our first foray into Lucknow. And we also believe that there will be some synergies between the existing clinic and the new clinic because we have almost around 20-odd cities where we have single clinics. The focus is to make sure the fact that we are able to increase the footprint in these cities and take the synergies with the existing clinics. So there are 2 parts.
One is the doctor expertise that we already built in these cities. At the same time, if we buy machines for these cities, we can share between the 2 clinics. So we don't have to necessarily buy the same technology -- We don't have to necessarily buy the same technology in 2 different clinics, we can actually share the technology between the clinics. So the whole idea is go to Tier 2 cities, leverage on the profitability of these cities and grow the footprint in these cities. The numbers are being worked on at the moment. I won't be able to give you those numbers at this stage, but that's the broad idea of how we are planning to expand.
So if I understand right, this is the second clinic in Lucknow?
Yes. This is the second clinic in Lucknow.
Okay. So my -- next question was on compared to the September quarter results -- comparable revenue is there, INR 83 crores -- INR 83.4 crores, in September also it was the same. I see that there is an incremental INR 5 crores increase in the operating and manufacturing expenses. So what is this incremental expense, where would have we incurred these expenses?
So, Anoop, basically, if you look at cost comparison last September to this September. So the last year September, there was a COVID, we've done some rationalization in the cost, okay? On the manufacturing side also, if you look at the product business was also a little bit low as compared to the current business. So product [indiscernible] in September as compared to this year has gone up, even the service revenue from consumption point of has gone up and that's why the cost has gone up. So the number of sessions have gone up in that case.
Saurabh, I was asking about this September 2021 and March 2022, like there is a INR 5 crore increase in other nonemployee cost expenses.
So last year, if you recollect, there was a COVID. So we have done rationalization last year in other expenses also.
So you are saying that, that rationalization impact is done. So we don't -- the costs are back to the normal?
Yes. So the cost has now come to the normal in this quarter. So this quarter, there is no rationalization in any of the cost items. Even, Anoop, sorry, there was a rent -- we were having rent savings and everything in that quarter, which in this quarter, we don't have to that quantum. So that's why you were looking at the overall scenario where the saving coming.
[Operator Instructions] Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
So thank you, everyone, for participating on the call.
Thank you. Ladies and gentlemen, on behalf of Dolat Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.